Bombay HC restrains Canara Bank from taking possession of property under SARFAESI Act

The Bombay High Court restrained Canara Bank from taking over a bungalow in Worli locality of Mumbai from one of its borrowers and guarantor of a loan under the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act).

The Hong Kong branch of the Canara Bank had lent the company $5 million and the company subsequently failed to repay.

The petitioner, Sapna Agarwal was the guarantor for the loan availed by Grace On, a company owned by her and her husband. The company is incorporated as per the laws of Hong Kong Special Administrative Region. The securities under the sanctioned loan included personal guarantee of Agarwal as well as the mortgage of the said property in Worli. The current market value of the bungalow is valued around Rs. 150 crores.

The guarantor approached the Bombay High Court seeking to quash the action initiated by Canara bank to recover the proceeds stating that the loan was availed by the entity based out of Hong Kong through the bank’s branch in Hong Kong and therefore the agreements are governed by laws of Hong Kong and not India and therefore Canara Bank’s India office has no powers to invoke SARFAESI Act provisions.

The Canara Bank’s overseas branch had served two notices to Agarwal on June 24 and June 28 for taking possession of the bungalow. The petitioner argued that she is an Indian national and not the authorised dealer in foreign exchange.